Time ticking on benefit
Social Security problem will only grow larger over
BY KEN MORITSUGU Knight Ridder Newspapers: Feb.29, 2004
WASHINGTON - Americans received a rude reminder this week that their future
Social Security and Medicare benefits almost certainly will be less than
It doesn't matter if, as Republicans propose, workers
receive individual accounts within Social Security and invest them in the stock
market. It doesn't matter if, as Democrats propose, current annual surpluses in
the two retirement programs are locked away
Money still will fall
short of what's been promised to an exploding retiree population. The federal
government, as Federal Reserve Chairman Alan Greenspan put it in a wake-up call
to Congress last week, is "overcommitted."
In less than a decade, tax
revenue for Medicare will fall short of benefit payouts. Social Security will
face red ink by 2018.
Deficits will start small, then mushroom.
Revenues will cover only three-fourths of the costs of Medicare in 2026 and of
Social Security in 2042. For Social Security, the shortfall will grow from $25
billion in 2018 to $568 billion in 2030 and top $1 trillion in 2040.
If benefits aren't reduced Greenspan proposes increasing the retirement age and
using a less-generous inflation adjustment for payouts - the government will
have to raise taxes or borrow money to make up shortfalls. Closing gaps with
cuts elsewhere would ravage federal spending.
But raising taxes could
prove self-defeating by strangling the source of revenues. The shortfalls loom
so large that the tax increases needed to fill them would threaten economic
growth. Borrowing that much money would push up interest rates and stifle the
economy. A slower economy would mean fewer goods and services to support a
retired population. And as workers' incomes slowed, so would tax
In other words, doing nothing now could force decisions down
the road, when fewer resources are available. That would be far more painful
than doing something today.
Expert witnesses repeatedly have warned
Congress about the looming shortfalls, sparking much talk but no action.
President Clinton held a White House conference in 1998. President Bush
appointed a study commission in 2001. Politicians love to beat up each other
over the issue, but no lawmaker wants to face an election-year charge of raising
taxes or cutting benefits.
"The people in the House and Senate,
Republicans and Democrats, are desperate to avoid this issue," said David John,
a Social Security expert at the conservative Heritage Foundation in
Aside from a handful of lawmakers, "profiles in courage
cannot be found on this issue," he said.
"Nobody is talking about
anything involving a hard choice," said Robert Bixby, executive director of the
Concord Coalition, a Washington group advocating balanced budgets. "'Whether you
agree with a particular solution or not, you're going to have to do something to
reduce benefits or raise revenues. That's unassailable."
running for re-election, action this year is a lost cause. Conventional wisdom
holds that Social Security reform is possible only in a president's second term,
when he won't have to face voters again.
Clinton tried to forge a
bipartisan solution with a Republican Congress in his second term, but the
Monica Lewinsky scandal soured the mood.
Bush, if re-elected, could
have the advantage of a Republican Congress. Nonetheless, it would take an
all-out effort by the White House, with some arm-twisting of reluctant
lawmakers, to pass legislation, John said. With such support - which isn't
guaranteed - he gives a bill a 60 percent chance of success.
Democrat wins the White House, action likely would await his second